Boutique bank that advised on ICE-NYSE deal plans expansion

NEW YORK Wed Dec 11, 2013 4:08pm EST

NEW YORK Dec 11 (Reuters) - Broadhaven Capital Markets, a 13-person investment bank that has advised on some of the biggest deals in the exchange space in recent years, is gearing up to expand.

The boutique bank, whose recent deals include IntercontinentalExchange's $11 billion takeover of Big Board operator NYSE Euronext, is planning to open offices in San Francisco and London to complement its Stamford, Connecticut-based operations in the next several months.

The West Coast expansion will bring the firm closer to key players in the fast-growing payment provider industry, co-founder Jerry von Dohlen said in an interview.

A presence in London will better position Broadhaven to take part in international deals, he said.

While it lacks the massive balance sheet of the big investment banks, Broadhaven has an advantage in being an independent adviser for exchange mergers, because big banks also happen to be the main customers of exchanges and often own stakes in them.

"There are lots of levels of conflict and sometimes it's nice to just stay out of the way of that," said an exchange executive who wished to remain anonymous because he did not have permission to speak to the media.

Big banks still get the lion's share of deals, but the independence dynamic has paid off for Broadhaven. The firm has advised on some of the top exchange deals in the past couple of years, including BATS Global Markets' merger with Direct Edge Holdings LLC and its acquisition of Chi-X Europe; and Nasdaq OMX Group's sale of clearinghouse IDGC to LCH.Clearnet.

At the core of the bank are former Goldman Sachs Group Inc investment banker von Dohlen, and former UBS and Wasserstein Perella & Co banker Greg Phillips, who together started Broadhaven in 2009.

Von Dohlen said the decision to go out on his own was in part a way to get close to firms that were still small and help them grow, which large banks do not generally do because they focus on large clients that generate big fees.

ROLLING UP THE SLEEVES

U.S.-based stock exchange operator BATS was introduced to Broadhaven through one of its customers and the fit was good from the start, BATS Chief Executive Joseph Ratterman said in an interview.

"We like the idea of someone that kind of rolls up their sleeves and has the experience and the relationships but isn't a large shop," he said. "We personally like the smaller hands-on profile."

Broadhaven's independence was critical when it advised BATS on its merger with Direct Edge, a deal announced in August that will create the No. 2 U.S. stock market, said a source who at the time was an executive involved in the talks.

BATS has seven large banks as investors, each with a seat on the exchange's board, and the company did not want to be seen as picking favorites, said the former executive.

"Joe said 'I don't want to hear from my board,'" the person said, referring to Ratterman. "That's why you have an independent firm doing it."

BATS' investors include Bank of America, Citigroup Inc, Credit Suisse, Deutsche Bank, JPMorgan Chase & Co, and Morgan Stanley.

Broadhaven is a regular adviser to ICE on deals, with von Dohlen's relationship with the exchange operator going back for nearly a decade.

"I would always be one of Jerry's first calls if he heard something interesting that was going on," said an ICE executive, who asked not to be named due to the matter's private nature.

Morgan Stanley was the lead adviser on the ICE-NYSE deal, but Broadhaven was instrumental behind the scenes, helping fill in gaps in ICE's lean financial team, the executive said.

Broadhaven has had some bumps along the way. One of its early jobs for ICE was advising on its failed $13.3 billion hostile takeover of NYSE Euronext with Nasdaq OMX.

"That was not their finest moment," said the exchange executive, adding that the failure of that deal was not due to Broadhaven but factors beyond its control.

As part of its growth plans, Broadhaven hired Michael Spellacy, former head of Boston Consulting Group's alternative investment practice, to advise asset management firms.

With the recent spate of consolidation among U.S. exchanges, Broadhaven doesn't expect any major near-term U.S.-based deals.

"There will be a period of digestion," von Dohlen said. "But for us that just means a number of small- to middle market-sized transactions while the bigger players digest what they have and figure out their next move."

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